what is the most important part of the hard money application?

hard money or private money has different requirements than conventional or bank money

Because hard money lenders have a different focus than bank money, the weight of different elements of the application is varied.

A hard money lender wants to focus on the deal - tell us about the property. This is a part of the application that the lender will want you to be an expert on. It will give them pause if there are questions you have not thought about or you don’t know. Things to consider:

1. Purchase Price or Maximum Offer Price

2. After Repair Value - what will it be worth after you improve it?

3. Exit Strategy

   1. will you be fixing and flipping the property? your exit strategy is the sale.

   2. will you be improving and renting the property? your exit strategy may be a refinance.

   3. are you expecting another property to sell or a large cash inflow? you may be planning to pay off the loan direct with the lender.

4. What are your planned improvements on the property? And what will that cost?

   1. are you adding square footage?

   2. replacing appliances?

   3. repairing structural issues - like roof or foundation?

   4. if you are improving vacant land, have you met with the building authority for what they will require and what entitlements will cost?

   5. based on the comparable properties surrounding the area, what do the improved homes have that your home needs?

5. Do you have reserves for if things are more expensive or go wrong? any built-in contingency plans? are there things you can save on without affecting the future repair value?

You can make your future lender feel more comfortable by being an expert on your deal. They will place less weight on your personal financial picture. If you don’t know an answer, just make sure that you can get that information to your lender in a timely fashion. Do not make up an answer if you don’t know it. If there is a problem on the property in the future, your honesty will be very important to your lender. This will make for a much better working relationship.

What is Hard Money Lending?

you’re looking to invest in real estate and keep hearing about hard money lending or private money lending, but what is it?

Hard Money Lending Myths

Case Study - Thornton Heights East Fix n Flip

BEFORE

New Investor’s First Flip

Basics

Purchase Price $248,000

Rehab Budget $40,000

Sold Price $366.000

Deal Profit over $30,000

Repairs Made

• Structural

• New Roof

• New Flooring Throughout

• Finished the Basement

• Replaced Furnace & A/C

• Added Landscaping and Improved Front Steps

Savings Idea

Investor was originally going to get new Cabinet Fronts or New Cabinet Systems, but decided that the cabinets were salvageable and instead painted the cabinets and fronts to save substantial money in the rehab budget.

AFTER!

progress photos below:

DIY Projects You Can Do in Your Rentals

If you are an active real estate investor, it is likely you have rental properties.

When getting your rental properties to cash flow, you need to save money whenever you can. If you are just starting out, it is possible to do quite a few things yourself to save on your maintenance costs. Below are some of the things we see real estate investors self perform:

Drywall Patches Between Tenants

Painting

(while certainly not a fun gig, if you have the patience, it can save you quite a bit of money)

Mini Bathroom Remodels

If you’re looking at ways that you could possibly look to increase rental rates, consider some upgrades. A little can go a long way to what a renter is seeing.

Carpet Cleaning

Renting a carpet cleaning machine from a local vacuum store or big box like Home Depot or Loewe’s.

Minor Landscaping

Curb Appeal like adding mulch can make your rental property more desirable to tenants

Replacing Light Fixtures

We hope that these ideas get your mind working to see how you could possibly save money by self performing some improvements to your rental properties between renters.

what is an accredited investor?

As you are getting started real estate investing, you might be seeing offerings for passive investment.

Some of these investment offerings require their investors be accredited. So what does that mean?

The full requirements are linked here:

Electronic Code of Federal Regulations

For an individual to be considered an accredited investor:

• their net worth (not counting their primary residence) is $1,000,000 + OR

• they make $200,000/year in gross income in the past 2 years OR

• they make $300,000/year in gross income filing jointly with a spouse in the past 2 years

These rules exist to help protect investors who could be “duped” by investment offerings, hoping that investing in these types of offerings wouldn’t be catastrophic for the average individual.

It is still very possible to invest in real estate without being accredited, but certain offerings are only available to those individuals.

Do I Need to Become a Real Estate Agent to Invest?

At TABS, we meet many new investors who frequently have questions about how to get started in real estate investing. A frequent question we receive is “Should I become a Real Estate Agent?”

Our Answer….it depends (I bet you didn’t see that coming)

Here are some pros

• automatic access to MLS

• access to view properties without scheduling with a real estate agent

• saving on paying commissions to a real estate agent

With that, there are some cons

• In Colorado, you are required to “hang” your license under someone for a period of 2 years. That company will likely have requirements that they be paid sometimes a monthly fee in addition to a cut of all sales. They will probably also have sales requirements.

• You’re new. So you would be learning two new trades rather than relying on the expertise of an experienced real estate agent. An experienced agent can help you navigate a decent deal, can offer up suggestions on what repairs buyers are looking for, can appropriately help price a home. They also have contract and negotiating experience that could be of help.

• There is more potential for liability with a license. A license requires insurance, which can create a target if someone is looking to sue

We hope this helps you make your decision.

Case Study - Riverwood New Construction

New Construction in Riverwood Neighborhood of Breckenridge, CO

Finished Home

Vacant Lot with Trees and Boulders

Basic Info

• Purchase Price Land $487000 in October 2017

• Sold Newly Constructed Home for $2,995,000 in January 2019

Market Value of Property

IT'S OUR BIRTHDAY!

how do you keep your tenants happy?

Goal: Keep Long Term Tenants Who Pay Their Rent

tenant washer / dryer

To accomplish this goal, keep them happy. Here are some ways to consider doing that:

1. Make it easy to pay rent. There are online services that allow renters to pay through a web portal - often this will add the fee to the renter’s side of the transaction. Here are some options, but there are many out there for you to look into:

   Pay Your Rent.com

   Rentler

   RentGroove

2. Consider allowing a reasonable amount of pets - especially in Colorado where many folks own dogs or cats. It is a very important component for them choosing a place to live.

3. If possible, add bathrooms. Renters will prefer a place with a bathroom per room rather than shared.

4. COMMUNICATION - Most problems stem from poor communication. If you’re trying to set someone up for a repair for instance, communicate the timeline so that they aren’t left wondering.

5. Consider offing a renewal incentive, if you have a good tenant you would like to keep. Good tenants are worth their weight in gold.

6. Let tenants know kinks about the property and how things work. Hopefully this will lead to fewer calls later about where to shut off water or power etc. Let them know how to look up if there is a power outage in their area rather than something wrong with the home. You would be surprised, but people aren’t always familiar with how to check.

7. Do not over-inspect the property. Give tenants pace and provide them notice if you need to come by.

8. If you raise the rent on a tenant who stays, consider making an improvement at the same time as an incentive.

9. If possible, don’t get the cheapest appliances - they won’t last as long. Consider getting a warranty should repairs be necessary.